Condensed Pro-Forma Consolidated Financial Statements
For the nine months ended August 31, 2018
(Unaudited)
NOTICE OF NO-AUDITOR REVIEW OF
PRO-FORMA FINANCIAL STATEMENTS
The accompanying unaudited condensed pro-forma consolidated financial statements have been prepared by Management and have not been subject to a review by the Company’s external independent auditors.
Liquid Media Group Ltd. |
Condensed pro-forma consolidated statement of financial position |
As at August 31, 2018 |
Expressed in Canadian Dollars |
(Unaudited) |
Preliminary | ||||||||||||
August 31, | Pro-Forma | August 31, | ||||||||||
2018 | Notes | Adjustments | 2018 | |||||||||
ASSETS | ||||||||||||
Current | ||||||||||||
Cash and cash equivalents | $ | 132,121 | 2A, 2B | $ | 4,254,880 | $ | 4,387,001 | |||||
Restricted cash | 574,510 | - | 574,510 | |||||||||
Accounts receivable | 91,248 | - | 91,248 | |||||||||
Sales tax and other receivables | 24,408 | - | 24,408 | |||||||||
Prepaid expenses | 25,912 | - | 25,912 | |||||||||
Loans receivable | 417,317 | - | 417,317 | |||||||||
1,265,516 | 4,254,880 | 5,520,396 | ||||||||||
Investment in films | 343,281 | - | 343,281 | |||||||||
Investment in associate | 427,276 | - | 427,276 | |||||||||
Other assets | 56,506 | - | 56,506 | |||||||||
Intangible assets | - | 2C | 7,667,619 | 7,667,619 | ||||||||
Goodwill | 1,964,587 | - | 1,964,587 | |||||||||
Total assets | $ | 4,057,166 | $ | 11,922,499 | $ | 15,979,665 | ||||||
LIABILITIES | ||||||||||||
Current | ||||||||||||
Accounts payable and accrued liabilities | $ | 1,324,658 | 2D | $ | (597,353 | ) | $ | 727,305 | ||||
Income tax payable | 45,018 | - | 45,018 | |||||||||
Due to related parties | 351,960 | 2D | (106,369 | ) | 245,591 | |||||||
Liabilities attributable to discontinued operations | 250,000 | - | 250,000 | |||||||||
Contingent consideration | 1,174,950 | - | 1,174,950 | |||||||||
Loans payable | 1,039,677 | 2D | (130,000 | ) | 909,677 | |||||||
4,186,263 | (833,722 | ) | 3,352,541 | |||||||||
Deferred income taxes | 301,000 | - | 301,000 | |||||||||
Total liabilities | 4,487,263 | (833,722 | ) | 3,653,541 | ||||||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||||
Share capital | 7,098,700 | 2A,2B,2C,2D | 12,912,221 | 20,010,921 | ||||||||
Commitment to issue shares | 172,550 | 2D | (156,000 | ) | 16,550 | |||||||
Contributed surplus | 1,496,933 | - | 1,496,933 | |||||||||
Accumulated other comprehensive income | (783 | ) | - | (783 | ) | |||||||
Accumulated deficit | (9,255,730 | ) | - | (9,255,730 | ) | |||||||
Deficit attributable to shareholders of the company | (488,330 | ) | 12,756,221 | 12,267,891 | ||||||||
Non-controlling interest | 58,233 | - | 58,233 | |||||||||
(430,097 | ) | 12,756,221 | 12,326,124 | |||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 4,057,166 | $ | 11,922,499 | $ | 15,979,665 |
The accompanying notes form an integral part of these condensed pro-forma consolidated financial statements.
Liquid Media Group Ltd. |
Condensed pro-forma consolidated statement of comprehensive loss |
For the nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
Preliminary | ||||||||||||
August 31, | Pro-Forma | August 31, | ||||||||||
2018 | Notes | Adjustments | 2018 | |||||||||
Sales | $ | 568,231 | $ | - | $ | 568,231 | ||||||
Cost of sales | (158,330 | ) | - | (158,330 | ) | |||||||
Gross profit | $ | 409,901 | $ | - | $ | 409,901 | ||||||
Operating Expenses | ||||||||||||
Consulting and director fees | $ | 599,085 | $ | - | $ | 599,085 | ||||||
Foreign exchange loss | 68,606 | - | 68,606 | |||||||||
Interest expense | 96,227 | - | 96,227 | |||||||||
Investor relations, filing and compliance fees | 12,075 | - | 12,075 | |||||||||
Other general and administrative expenses | 145,408 | - | 145,408 | |||||||||
Professional fees | 102,962 | - | 102,962 | |||||||||
Salaries and benefits | 42,982 | - | 42,982 | |||||||||
Travel and promotion | 12,533 | - | 12,533 | |||||||||
1,079,878 | - | 1,079,878 | ||||||||||
Loss before other items | (669,977 | ) | - | (669,977 | ) | |||||||
Other income (expenses) | ||||||||||||
Interest income | 39,471 | - | 39,471 | |||||||||
Listing expense | (4,090,871 | ) | - | (4,090,871 | ) | |||||||
Project investigation | (289,767 | ) | - | (289,767 | ) | |||||||
Share of loss of equity investment | (31,997 | ) | - | (31,997 | ) | |||||||
(4,373,164 | ) | - | (4,373,164 | ) | ||||||||
Net loss before income tax | $ | (5,043,141 | ) | $ | - | $ | (5,043,141 | ) | ||||
Income tax expense | 44,227 | - | 44,227 | |||||||||
Net loss | $ | (5,087,368 | ) | $ | - | $ | (5,087,368 | ) | ||||
Other comprehensive loss | ||||||||||||
Items that may be reclassified to profit and loss | ||||||||||||
Foreign currency translation adjustment | (783 | ) | - | (783 | ) | |||||||
Net loss and comprehensive loss | $ | (5,088,151 | ) | $ | - | $ | (5,088,151 | ) | ||||
Net loss attributable to: | ||||||||||||
Shareholders of the company | $ | (5,149,047 | ) | $ | - | $ | (5,149,047 | ) | ||||
Non-controlling interest | 61,679 | - | 61,679 | |||||||||
Net loss | $ | (5,087,368 | ) | $ | - | $ | (5,087,368 | ) | ||||
Earnings (loss) per share, basic and diluted | (1.66 | ) | - | (1.66 | ) | |||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic and diluted | 3,094,681 | - | 3,094,681 |
The accompanying notes form an integral part of these condensed pro-forma consolidated financial statements.
Liquid Media Group Ltd. |
Condensed pro-forma consolidated statement of changes in equity (deficiency) |
As at August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
Accumulated | |||||||||||||||||||||||||||||||||
Additional | Commitment | Other | Attributable | Non- | |||||||||||||||||||||||||||||
Paid Up | to Issue | Contributed | Comprehensive | to company | controlling | ||||||||||||||||||||||||||||
Notes | Shares | Amount | Capital | Shares | Surplus | Income | Deficit | shareholders | interest | Total | |||||||||||||||||||||||
Balance, December 1, 2017 | 10,888,572 | $ | 2,364,400 | $ | - | $ | 168,550 | $ | 1,440,316 | $ | - | $ | (4,106,683 | ) | $ | (133,417 | ) | $ | - | $ | (133,417 | ) | |||||||||||
Shares issued pursuant to acquisition agreement | 333,333 | 415,000 | - | - | - | - | - | 415,000 | - | 415,000 | |||||||||||||||||||||||
Non-controlling interest acquired | - | - | - | - | - | - | - | - | (3,446 | ) | (3,446 | ) | |||||||||||||||||||||
Opening balance of Leading Brands Inc. | 2,802,412 | 31,305,247 | 19,455,359 | - | - | - | (50,517,540 | ) | 243,066 | - | 243,066 | ||||||||||||||||||||||
Eliminate capital stock of Liquid Media (Canada) Ltd. | (11,221,905 | ) | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||
Eliminate Leading Brands paid in capital and deficit | - | (31,305,247 | ) | (19,455,359 | ) | - | - | - | 50,517,540 | (243,066 | ) | - | (243,066 | ) | |||||||||||||||||||
Issuance of shares to former shareholders of Liquid Canada | 6,442,486 | 4,277,319 | - | - | 56,617 | - | - | 4,333,936 | - | 4,333,936 | |||||||||||||||||||||||
Share issuance costs | - | (23,200 | ) | - | - | - | - | - | (23,200 | ) | - | (23,200 | ) | ||||||||||||||||||||
Warrants exercised for cash | 100,000 | 65,181 | - | - | - | - | - | 65,181 | - | 65,181 | |||||||||||||||||||||||
Warrants exercised for shares to be issued | - | - | - | 4,000 | - | - | - | 4,000 | - | 4,000 | |||||||||||||||||||||||
Exchange on translation | - | - | - | - | - | (783 | ) | - | (783 | ) | - | (783 | ) | ||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | (5,149,047 | ) | (5,149,047 | ) | 61,679 | (5,087,368 | ) | ||||||||||||||||||||
Preliminary Balance,August 31 ,2018 | 9,344,898 | $ | 7,098,700 | $ | - | $ | 172,550 | $ | 1,496,933 | $ | (783 | ) | $ | (9,255,730 | ) | $ | (488,330 | ) | $ | 58,233 | $ | (430,097 | ) | ||||||||||
Pro-Forma – Common shares issued for cash | 2A | 4,000,000 | $ | 4,157,440 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 4,157,440 | $ | - | $ | 4,157,440 | |||||||||||||
Pro-Forma – Warrants exercised for cash | 2B | 150,000 | 97,440 | - | - | - | - | - | 97,440 | - | 97,440 | ||||||||||||||||||||||
Pro-Forma – SeriesOne Holdings LLC | 2C | 1,900,000 | 2,209,290 | - | - | - | - | - | 2,209,290 | - | 2,209,290 | ||||||||||||||||||||||
Pro-Forma – World of Wireless UK Limited | 2C | 1,500,000 | 1,753,920 | - | - | - | - | - | 1,753,920 | - | 1,753,920 | ||||||||||||||||||||||
Pro-Forma – Lightning Man Media LLC | 2C | 600,000 | 647,002 | - | - | - | - | - | 647,002 | - | 647,002 | ||||||||||||||||||||||
Pro-Forma – Zift Interactive | 2C | 670,000 | 1,305,696 | - | - | - | - | - | 1,305,696 | - | 1,305,696 | ||||||||||||||||||||||
Pro-Forma – Throwback Entertainment Inc. | 2C | 670,000 | 1,296,991 | - | - | - | - | - | 1,296,991 | - | 1,296,991 | ||||||||||||||||||||||
Pro-Forma – StratusCore, Inc. | 2C | 440,000 | 454,720 | - | - | - | - | - | 454,720 | - | 454,720 | ||||||||||||||||||||||
Pro-Forma – Debt to Share Conversion | 2D | 711,103 | 989,722 | - | (156,000 | ) | - | - | - | 833,722 | - | 833,722 | |||||||||||||||||||||
Balance, August 31, 2018 | 4 | 19,986,001 | $ | 20,010,921 | $ | - | $ | 16,550 | $ | 1,496,933 | $ | (783 | ) | $ | (9,255,730 | ) | $ | 12,267,891 | $ | 58,233 | $ | 12,326,124 |
Theaccompanying notes form anintegral part of thesecondensed pro-formaconsolidatedfinancialstatements.
Liquid Media Group Ltd. |
Notes to the condensed pro-forma consolidated financial statements |
For the nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
1. | BASIS OF PRESENTATION |
Liquid Media Group Ltd. (“Liquid” or the “Company”), formerly Leading Brands Inc. (“LBIX”), is the parent company of Liquid Media Group (Canada) Ltd. (“Liquid Canada”). Details of the Company’s subsidiaries at the end of the reporting period are as follows:
Incorporation | Percentage owned | Functional Currency | |||||||
Liquid Media Group (Canada) Ltd. | Canada | 100% | Canadian | ||||||
Household Pests Holdings, Inc. | USA | 50% | US | ||||||
Majesco Entertainment Company | USA | 51% | US |
On August 9, 2018, the Company announced the successful closing of the proposed business combination with LBIX by way of plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement"). Pursuant to the Arrangement, Liquid Canada was acquired by and became a wholly-owned subsidiary of LBIX. As part of the Arrangement, on August 10, 2018, LBIX changed its name to “Liquid Media Group Ltd.” and Liquid Canada changed its name to “Liquid Media Group (Canada) Ltd”. At the time of completion of the Arrangement, the Company had 9,244,898 common shares issued and outstanding, including 6,442,486 issued to former Liquid Canada shareholders, representing 69.69% of the Company’s issued and outstanding shares. Initially, the common shares of the Company issued in connection with the Arrangement were listed on NASDAQ under the ticker symbol “LBIX”. Effective August 10, 2018, the trading symbol of the Company was changed to “YVR”.
Upon closing of the transaction, the shareholders of Liquid Canada owned 69.69% of the common shares of the Company, and as a result, the transaction is considered a reverse acquisition of the Company by Liquid Canada. All previous common shares and warrants were exchanged at a ratio of 0.5741 of LBIX for 1 share of Liquid Canada (“Conversion Rate”). For accounting purposes, Liquid Canada is considered the acquirer and the Company, the acquiree. Accordingly, the condensed pro-forma consolidated financial statements are in the name of Liquid Media Group Ltd; however, they are a continuation of the financial statements of Liquid Canada.
The condensed pro-forma consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The financial statements of LBIX were formerly prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
The unaudited condensed pro-forma consolidated financial statements give effect to several transactions, including: a proposed private placement, the exercise of additional warrants, share-based payment transactions in exchange for intangible assets and a share for debt conversion (detailed in Note 2). These transactions have occurred, or are expected to occur, after the period ended August 31, 2018. The condensed pro-forma consolidated financial statements are not necessarily indicative of the financial position of the Company on the date of the completion, or expected completion, of the proposed transactions.
The unaudited condensed pro-forma consolidated financial statements have been prepared for illustrative purposes only and may not be indicative of the combined entities’ financial position that would have occurred if the proposed transactions had taken place by August 31, 2018. Actual amounts recorded upon consummation of the transactions will likely differ from those recorded in the condensed pro-forma consolidated financial statements and may be significantly different.
These condensed pro-forma consolidated financial statements include:
• | A preliminary condensed consolidated statement of financial position of the Company as at August 31, 2018, the preliminary unaudited condensed interim statement of comprehensive loss for the nine months ended August 31, 2018 and a preliminary condensed interim consolidated statement of changes in equity (deficiency) as at August 31, 2018. All of which were compiled from the preliminary unaudited condensed interim consolidated financial statements for the period ended August 31, 2018. |
Liquid Media Group Ltd. |
Notes to the condensed pro-forma consolidated financial statements |
For the nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
2. | PRO-FORMA ASSUMPTIONS |
The unaudited condensed pro-forma consolidated financial statements give effect to the following transactions and assumptions as if they had occurred on August 31, 2018. The share issuances and corresponding share prices listed below are calculated prior to the Company’s 1-5 Reverse Stock Split as defined in Note 4 below.
A. | Brokered Private Placement: Further to Company’s news release dated September 13, 2018, the Company intends to complete a brokered private placement (the “Offering”) with Mackie Research Capital Corp. (the “Agent”) whereby the Company will issue 4,000,000 subscription receipts priced at $0.80 USD per receipt for gross proceeds of $3,200,000 USD ($4,157,440 CAD). Under the terms of the engagement agreement entered into with the Agent, each subscription receipt issued in connection with the Offering will be automatically exchanged into one common share of the Company plus one common share purchase warrant of the Company, exercisable at $1.00 USD for 36 months, at closing. The financial statement impact of the warrant issuance has not been accounted for in these condensed pro-forma consolidated financial statements. The table below summarizes the proposed transaction. |
Shares | Price per | Amount | Amount | |||||||||||||
Issued | Share (USD) | (USD) | FX Rate | (CAD) | ||||||||||||
Private Placement | 4,000,000 | $ | 0.80 | $ | 3,200,000 | 1.2992 | $ | 4,157,440 |
B. | Proceeds from Additional Warrant Conversions: Subsequent to August 31, 2018, an additional 150,000 warrants of the Company were exercised which generated $75,000 USD ($97,440 CAD) in cash proceeds. The table below summarizes the transaction. |
Shares | Price per | Amount | Amount | |||||||||||||
Issued | Share (USD) | (USD) | FX Rate | (CAD) | ||||||||||||
Warrants exercised | 150,000 | $ | 0.50 | $ | 75,000 | 1.2992 | $ | 97,440 |
C. | Share-based Payments for Intangible Assets: The following table below summarizes the share-based payment transactions that were announced by the Company on October 12, 2018. These pro-forma adjustments are based on the assumption that the share-based payment transactions issued in exchange for intangible assets qualify for the recognition of intangible assets at the stated amounts in the table below in accordance with IFRS. |
Shares | Price per | Amount | Amount | |||||||||||||
Issued | Share (USD) | (USD) | FX Rate | (CAD) | ||||||||||||
SeriesOne Holdings LLC | 1,900,000 | $ | 0.895 | $ | 1,700,500 | 1.2992 | $ | 2,209,290 | ||||||||
World of Wireless UK Ltd. | 1,500,000 | 0.90 | 1,350,000 | 1.2992 | 1,753,920 | |||||||||||
Lightning Man Media LLC | 600,000 | 0.83 | 498,000 | 1.2992 | 647,002 | |||||||||||
Zift Interactive LLC | 670,000 | 1.50 | 1,005,000 | 1.2992 | 1,305,696 | |||||||||||
Throwback Entertainment | 670,000 | 1.49 | 998,300 | 1.2992 | 1,296,991 | |||||||||||
StratusCore, Inc. | 440,000 | 0.795 | 350,000 | 1.2992 | 454,720 | |||||||||||
5,780,000 | $ | 5,901,800 | $ | 7,667,619 |
i. | SeriesOne Holdings LLC(“S1”): The Company will issue approximately 1,900,000 restricted share units to S1 at an average price of $0.895 USD per share unit in exchange for an initial 36-month platform license to operate a S1 crowd-funding portal solution under the Company brand. In addition, the Company acquired an exclusive license across all S1’s crowd-funding platforms for the entertainment and gaming industries for an initial term of 12-months. |
ii. | World of Wireless UK Limited(“WOW”): The Company will issue approximately 1,500,000 restricted share units to WOW at an average price of $0.90 USD per share unit in exchange for the development of a complete Company-branded in-game payment and rewards system for Company video games. The deliverable from WOW will include supporting mobile applications, loyalty and reward subsystems, and global payment network interfaces. As part of the rewards system, WOW will develop a Liquid Token system which will enable |
Liquid Media Group Ltd. |
Notes to the condensed pro-forma consolidated financial statements |
For the nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
Company consumers to exchange Liquid Tokens via mobile accounts, or use them to make in-game purchases or upgrades.
iii. | Lightning Man Media LLC(“Lightning Man”): The Company will issue approximately 600,000 restricted share units to Lightning Man at an average price of $0.83 USD per share as consideration for a license to market and distribute 6 video games owned by Lightning Man, including: Bunny Boom, Bar Crasher, Nyctophobia, Resurgence, Clowns and Machetes, and Piggy Pals. As part of the Lightning Man agreement, the Company has agreed to pay a total of $100,000 (in three tranches) to Lightning Man over a 6-month period for the rights to 2 future video game titles that will be jointly developed by the Company and Lightning Man. The financial statement impact of the $100,000 payment has not been incorporated into these condensed pro-forma consolidated financial statements. |
iv. | Zift Interactive LLC(“Zift”): The Company will issue approximately 670,000 restricted share units at $1.50 USD per share in exchange for complete intellectual property rights to “Blowout” and “Blast Works” video game titles. The Company announced that it has plans to re-launch both titles to modern video game platforms and consoles. |
v. | Throwback Entertainment Inc.(“Throwback”): On September 25, 2018, the Company entered into an agreement to acquire all rights and interest in 65 video game titles (the “Acquisition Agreement”) from Throwback. Under the terms of the Acquisition Agreement, the Company will issue 670,000 restricted share units at $1.49 USD per share. |
vi. | StratusCore, Inc.(“StratusCore”): On October 16, 2018, the Company entered into an agreement to acquire a limited, annual, non-exclusive, non-transferable right to use, and to grant its end customers access to, StratusCore’s web-based platform (the “Platform”). Under the terms of the agreement, the Company will issue 440,000 restricted share units at $0.795 USD per share unit. |
D. | Shares for Debt Settlement: On October 11, 2018, the Company announced that it had entered into several agreements to settle a total of $756,449 USD ($989,722 CAD) of Company debt through the issuance of 711,103 common shares of the Company at an average price of $1.06 USD per share. The table below summarizes the transaction. |
Shares | Price per | Amount | Amount | |||||||||||||
Issued | Share (USD) | (USD) | FX Rate | (CAD) | ||||||||||||
Shares for Debt Settlement | 711,103 | $ | 1.06 | $ | 756,448 | 1.3087 | $ | 989,722 |
3. | PRINCIPAL HOLDERS OF VOTING SECURITIES |
Following the consummation of the issuance of shares under item (A), (B), (C) and (D) of Note 2, there will be 19,986,001 issued and outstanding common shares of the Company without nominal or par value, each carrying the right to one vote per share.
To the knowledge of the directors and officers of the Company, no person or company beneficially owns or controls or directs, directly or indirectly, 10% or more of the issued and outstanding common shares of the Company.
The shareholdings of the directors of the Company, held personally or in companies which they control, based on 19,986,001 common shares being issued and outstanding, is set out below.
Liquid Media Group Ltd. |
Notes to the condensed pro-forma consolidated financial statements |
For the nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
Name of Shareholder | Number of Common Shares | Percentage of Issued and Outstanding Common Shares(1 | ) | |||
Daniel Cruz | 242,567 | 1.21% | ||||
Joshua Jackson | 1,192,855 | 5.97% | ||||
Charles Brezer | 228,490 | 1.14% | ||||
Total | 1,663,912 | 8.33% |
(1) | Does not include any common shares issuable to upon exercise of outstanding warrants. |
4. | REVERSE STOCK SPLIT |
On October 15, 2018, the Company effected a 1-for-5 reverse stock split (“Reverse Stock Split”) in furtherance of the Company’s compliance plan to fulfil Nasdaq’s $4.00 per-share minimum bid price requirement. The closing bid price for the Company’s common shares closed at $0.84 on Nasdaq on Friday, October 12, 2018. The post-split price, which is equivalent to $4.20 per share, exceeds Nasdaq’s minimum required closing bid price of $4.00 per share. Following the reverse split, the new CUSIP number for the Company’s common stock will be 53634Q204.